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DSV expects tight road haulage capacity in Europe to ease

Stuart Todd | 2018-03-08 11:51:43.0 Buoyant economic conditions could create labour supply bottlenecks across the industry DSV expects tight road haulage capacity in Europe to ease in 2018 having impacted its operations in the latter part of last year.

Speaking at a conference call with analysts last month which folowed the publication of the Danish group’s annual results, CEO, Jens Bjorn Andersen, said there had been “a little bit of a reminder – albeit not to the same degree – of the tremendous lack of capacity in certain areas leading up the financial crisis (of 2008).” He said constrained capacity during the final quarter of 2017, had led to a drop in DSV’s service levels to customers and had also put its Road division’s gross margin under pressure. However, price increases that DSV had managed to push through for 2018 provided scope for the unit’s profitability to recover, Andersen underlined. “Road transportation rates have been very low for a long period of time.”

Commenting on the reasons behind the supply and demand tensions in the segment, Andersen noted: “It’s not so much a lack of trucks that’s been the problem but a lack of drivers with some of the Eastern European capacity leaving the market in the last part of 2017. But in speaking to hauliers, it’s our very clear understanding that there is a strong willingness (on their part) to invest in more trucks.

And if we’re willing to commit to a little bit more than we have been in the past, I think we’ll get access to much more fixed capacity in the future.” He added: “We’ve been in dialogue with a number of Eastern European hauliers who have indicated they are willing to invest in hundreds of trucks.” DSV would also be taking steps to further centralise truck sourcing across its network and end procurement on a country to country basis. “This will help us too.”

Asked at the conference call about labour availability across other parts of DSV’s business and whether the group was experiencing difficulties in adding headcount where it was needed, CFO Jens Lund replied: “It’s clear that the economy is going well these days so it’s not necessarily easy to find (labour) capacities. So we have to work harder to find staff.

But so far we have not seen dramatic wage inflation. This might have happened in one or two isolated markets but what we do see is that in order to source blue-collar workers we sometimes have to drive them 70-80 kilometres to the warehouse and organise bus transport and stuff like this.” He continued: “Of course, IT experts are sometimes hard to find but we still manage to deal with it.

Fortunately, on the IT side, we are present in a number of geographies such as South Africa, Manila, Poland and the US. “However, if the economic growth we have seen continues, there might be some bottlenecks here and there. But we have yet to see a dramatic overheating (in labour supply) which we saw in 2007.

But I guess this could come in the next couple of years.

Then the global economy will rebalance itself as it normally does.”

Image: Shutterstock

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